The 2012/11/14 at 09:08
Stéphanie Salti, in London
London’s world of finance has gone off the rails. At a time when the City has barely had time to digest news of the announcement of huge job cuts at the Swiss bank UBS – 3,000 out of 6,600 jobs in the City are targeted – the prognostics from the reputed market forecaster, the Centre for Economics and Business Research (CEBR), will hardly raise the morale of financiers. On 8 November, the Centre scaled down the prognostics it had published six months ago: the City should now expect to lose 13,000 jobs next year, bringing the total number of jobs in this district to 237,000, in other words the lowest level since 1993. We are now far off from the record set in 2007, when the City provided jobs for 354,000 people. Things are not likely to get much better in 2013 when the sector is set to employ 236,494 finance professionals, and it will not be until 2017 that the 240,000-job mark will be exceeded…
In the meantime, equity trading has dropped by 20 % in value in one year, while international orders for equity trading are down by over 50 %. Gilts trading has declined by one third, partly because the Bank of England is locking up a growing proportion. Currency trading has also fallen, by 5 %, registering its first drop since 2009. The CEBR reminds that the number of British mergers and acquisitions has also shrunk by over 30 % this year. Only private equity and mergers and acquisitions in the technology sector are managing to keep their end up, according to the CEBR. “The fall in activity is partly a function of the weak economy, partly a hangover effect from the financial crisis, and partly caused by increasing regulation which limits access to bank cash to bankroll financial transactions,” esteems Douglas McWilliams, Chief Executive of CEBR. As a corollary of these job cuts, bonuses, handed out around Christmas time, are to plummet, down from 33,000 pounds (41,200 euros) per employee to 6,400 pounds (8,000 euros).
The necessity – stronger than in the past – to cushion oneself with capital stock, coupled with questioning regarding the implementation of recommendations from the Vickers report on bank reforms to protect the retail business of banks from their investment business, are setting in place a new equilibrium in the financial sector. Job axing announcements have not ceased to be made in recent months: 900 jobs for the insurer Direct Line, 800 positions at Aviva. The British union Unite has also indicated that the partially nationalised banks, Lloyds Banking Group (LBG) and the Royal Bank of Scotland (RBS), have respectively cut over 28,000 and 26,000 jobs since the start of the financial crisis… On all sides, concern is growing in the face of the decline of the London financial market, expected to hand over its status as the world’s leading financial market to Hong Kong from 2015 onwards, according to the CEBR. The political sphere is wrestling with the problem.
According to an article published by the economic daily Financial Times on 8 November, British Parliament members are to determine whether the hardening of financial regulations is responsible for the departure of a certain number of finance professionals from the British capital. A study carried out by CityUK, a body that promotes the British financial services industry, already points towards the United Kingdom’s loss of competitiveness: over one-half of the financial jobs that should have been created on kept in the country in the last six years have been transferred overseas, estimates the study. While the United Kingdom continues to attract new investments on its soil, the largest businesses are increasingly wondering about the attractiveness of this country for business.
On a more positive note, the report considers that the country has undergone, in recent years, a rebalancing of its activity clusters in favour of regional hubs. Newcomers to the banking world, such as Tesco Bank or Virgin Money, have opted for Edinburg for their headquarters, while others, like the fund managers State Street or BlackRock, have preferred to set up their middle-office functions there. Deutsche Bank has also created jobs in Birmingham. All this does not take away the fact that the City’s role remains crucial in its capacity to generate jobs for the whole of the industry.